Problem 8-6A Disposal of plant assets LO C1, P1, P2

Onslow Co. purchased a used machine for $192,000 cash on January 2. On January 3, Onslow paid $8,000 to wire electricity to the machine and an additional $1,600 to secure it in place. The machine will be used for six years and have a $23,040 salvage value. Straight-line depreciation is used. On December 31, at the end of its fifth year in operations, it is disposed of.

Required:

1. Prepare journal entries to record the machine's purchase and the costs to ready it for use. Cash is paid for all costs incurred.

1. Record the purchase of a used machine for $192,000 cash.
2. Record the costs of $8,000 incurred on the used machine.
3. Record the cost of $1,600 for an operating platform.

2. Prepare journal entries to record depreciation of the machine at December 31

1. Record the first year year-end adjusting entry for the depreciation expense of the used machine.

2. Record the year of disposal year-end adjusting entry for the depreciation expense of the used machine.

3. Prepare journal entries to record the machines disposal under each separate situation: (a) it is sold for $21,500 cash; (b) it is sold for $86,000 cash; and (c) it is destroyed in a fire and the insurance company pays $32,000 cash to settle the loss claim.

1. Record the sale of the used machine for $21,500 cash.

2. Record the sale of the used machine for $86,000 cash.

3. Record the insurance settlement received of $32,000 resulting from the total destruction of the machine in a fire.